Beating about the Bushmaster

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The army's new Bushmaster troop carrier sums up what can go wrong with defence purchases. The prototype vehicles were 10 times less reliable than the army wanted. But the army bought them anyway because the only alternative was 20 times less reliable.

The original cost was supposed to be $170 million for 370 vehicles. In the end, taxpayers will get 299 vehicles for $329 million.

Almost a decade after the project was conceived, none of the vehicles has been accepted into full service and the Senate has been told that a poorly worded contract has effectively ruled out legal action against the contractor, Australian Defence Industries (ADI).

And though taxpayers' money has been used to develop the vehicles, the army has no patent over any part of the project and no royalty agreement with ADI if the company sells the vehicles overseas. Now that the wrinkles have been ironed out using taxpayer money, that looks likely.

The Defence Minister, Robert Hill, has revealed that the Iraqis are interested and that one of the prototypes would be sent to the United Arab Emirates. ADI says it has had inquiries from around the world.

The original concept was a light armoured vehicle to carry up to nine troops in air-conditioned comfort at more than 100 kmh - with chilled water on tap. Described as a "battle limousine", it was to be the first Australian-designed and developed combat vehicle since World War II.

But according to evidence to the Senate, the problems began almost immediately. Three companies were expected to trial their vehicles against each other, but only two put forward prototypes. The other competitor was the Taipan, a joint Australian-South African vehicle.

Four vehicles of each type were built and trialled, with the ADI vehicle - dubbed the Bushmaster - winning out. "The problem is that the vehicles did not meet the reliability requirement right from the start," explained Ian Williams, of the Defence Materiel Organisation (DMO). "The vehicles were used in Timor and were fairly effective in capability terms. That is why we were keen to try to keep it running."

Still, the army pressed ahead. "Even though it has its reliability problems, the other vehicle had twice the number of reliability problems and, therefore, it became a no-brainer," said Colonel Peter Acutt from the DMO.

In June 1999 the Government signed a contract with ADI to build 370 vehicles. ADI was then a Commonwealth-owned defence contractor, but two months later it was sold to a consortium of the Belgiorno-Nettis family-controlled Transfield and the French electronics entity Thomson-CSF. The new privately owned entity soon made it clear that the contract would not run smoothly.

"There was a whole series of problems, of which some were on the Defence side and some were on their side," Acutt said. "To put it in a nutshell, the ADI bid was based on 500 hours to build a machine and it was going to take them 1400 hours."

Williams said the original estimate was, in hindsight, probably "very optimistic". "You can say Defence should have checked on it, but we had a contract and ADI were prepared to sign up to it. Part of the problem, and probably what ADI will claim, is that they thought it was a commercial, off-the-shelf product.

"In reality, it is a series of commercial, off-the-shelf products [and] when you integrate them in a new vehicle, it is not a commercial vehicle any more, it is a combination. You might take a perfectly respectable braking system but, when you put it on a vehicle of different weight and configuration, you run into problems. My view is that ADI would be pushing to say they did not know it was developmental. Nevertheless they will say that is why they got it wrong," said Williams. "The original contract ... was sufficiently grey that lawyers would have made a lot of money over a long time debating the issue."

Rather than cancel the contract, Defence persisted until 2002, when a new version of the vehicle entered a second series of trials. By then the contract had been renegotiated, with the cost blowing out and a sharp reduction in the number of vehicles expected.

One factor behind the decision to continue was that jobs might have otherwise been lost from the ADI production plant in the Victorian city of Bendigo. Another, it has been claimed, was that no off-the-shelf alternative was available.

Today, the vehicle is still being tested. However, a spokesman for ADI, Leigh Funston, said it is expected to be in full production by the end of the year.

"The good news is that it has been designed and built here in Australia ... We are very confident that [the problems] are behind us," he said.